Insurers are set to incur higher claims due to the losses brought by the floods that are ravaging various parts of the country.
The floods, which have killed more than 200 people, destroyed property and disrupted businesses in recent weeks, are expected to hit general insurers the most.
These insurers offer cover for risks whose occurrence has increased in the wake of the higher-than-normal rainfall.
“I don’t have numbers, but there will certainly be an elevated number of claims arising from the floods. Particularly in fire, motor, and property policies,” said Tom Gichuhi, executive director of the Association of Kenya Insurers (AKI).
“Many cars were flooded, and properties were also damaged. Damage from floods is part of the risks covered in policies protecting assets.”
The Nairobi metropolitan area—where economic activities are concentrated— is among the hardest hit by the floods.
General or short-term insurers offer policies covering business operations and assets such as motor vehicles and buildings. A fire policy, for instance, can protect a customer from risks to their property, including fire, flood, landslide, riots and malicious damage. For an insured property, the sum assured would typically be the value of the asset.
Customers have been raising their protection against these risks in recent years. The general insurers collected premiums of Sh20.4 billion from fire industrial policies in the year ended December 2023, up from Sh17.6 billion a year earlier.
Fire domestic also saw its premiums grow to Sh2.03 billion from Sh1.81 billion over the same period, while private and motor commercial also recorded higher premiums, according to data from the Insurance Regulatory Authority.
Until the floods, the fire or property policies had generated minimal losses for the insurers, which had seen them keep most of the premiums as underwriting profit.
The general insurers incurred claims of only Sh1.2 billion and Sh329.9 million in their fire industrial and fire domestic policies, respectively, last year.
“In the current state of floods, we have registered several flood claims that are in the process of being compensated,” said Jackson Theuri, principal officer and CEO at Britam General Insurance.
Britam is among the major players in the fire and motor vehicle insurance classes, alongside others like APA Insurance, GA Insurance, CIC General Insurance, and ICEA Lion General Insurance, based on premiums collected.
“There will be more claims as a result of the floods. We, however, don’t expect a rise in premiums because we don’t expect the widespread flooding to be a frequent occurrence,” the CEO of another insurer, who did not wish to be named, said.
The uptake of flood insurance as a standalone product in Kenya has been low but is expected to grow in relevance in the context of climate change, which has led to increased frequency and severity of risks such as floods and droughts.
Britam is among the insurers increasing their focus on climate change-related risks.
Last year, in partnership with Swiss Re and Oxfam Kenya, Britam launched a flood insurance product designed to cushion small-scale farmers residing in flood-prone areas from the catastrophic effects of floods.
